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Cedi depreciates 3% in 6 months

July 7, 2016, 9:19 a.m.

The Ghana cedi ended the first half of this year with a depreciation of 3.04 per cent against the US dollar, Business Finder’s checks have revealed.

The local currency has been trading at almost GH¢3.99 to the ‘green back’ at the forex bureau and GH¢3.93 on the interbank market.

For the first quarter of 2016, the cedi registered a marginal 7 pesewas loss in value against the American currency, about 0.48 percent depreciation.

It lost about 60 pesewas in value to the US dollar last year. The local currency started 2015 at GH¢ 3.2001 to the American currency but ended the year at about GH¢3.80, depreciating by about 15.0 per cent.

In spite of measures taken by the Bank of Ghana (BoG) to tighten monetary policy, the economy still faces the problem of high inflation as the cedi’s performance on the forex market continues to significantly impact on prices and cost of domestic goods and services.

The outlook for the cedi’s performance for the rest of the year looks gloomy   as the scales weigh in favour of heightened volatility in response to expected external pressures.

In its monthly publications, umb Stockbrokers said “we anticipate volatility on the currency market as the slide in global commodity prices like oil, gold and cocoa weigh on the country’s forex earnings and put pressure on the national budget. Also, a possible rate hike by the US Feds will cause the cedi to tumble on the forex market.”  

 Ecobank Research has also predicted a weak cedi against the dollar due to strong US dollar demand to meet import bills, US debt servicing costs and large/unsustainable fiscal and current account deficits.

It added that “IMF advised reforms and continued tight policy stance by the Bank of Ghana will however help build confidence but rising inflation amid weak 2015/2016 cocoa output and higher spending in the run up to this year’s elections all raise concerns.”

The US Ambassador to Ghana, Mr Robert Jackson has however recently expressed optimism in the Ghanaian economy.

According to him, “the currency is stabilized as we are not seeing much depreciation and as long as Ghana sticks with the IMF programme, we will soon see inflation going down.”

The Ghana cedi has been ranked by Ecobank Research as the 7th worst performing currency on the African continent as at the end of May 2016.